Economics

Quality Investing: Owning the Best Companies for the Long Term

Quality Investing: Owning the Best Companies for the Long Term

  • Downloads：6435
  • Type：Epub+TxT+PDF+Mobi
  • Create Date：2021-04-24 11:55:21
  • Update Date：2025-09-14
  • Status：finish
  • Author：Lawrence A. Cunningham
  • ISBN：0857195123
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Summary

Quality。 We all make judgments about it every day。 Yet articulating a clear definition of quality in an investing context is challenging。 This book addresses the challenge， and distills years of practical investing experience into a definitive account of this under-explored investment philosophy。 Finance theory has it that abnormal outcomes do not persist， that exceptional performance will soon enough become average performance。 Quality investing involves seeking companies with the right attributes to overcome these forces of mean reversion and， crucially， owning these outstanding companies for the long term。 This book pinpoints and explains the characteristics that increase the probability of a company prospering over time - as well as those that hinder such chances。 Throughout， a series of fascinating real-life case studies illustrate the traits that signify quality， as well as some that flatter to deceive。 The authors' firm， AKO Capital， has a strong track record of finding and investing in quality companies - helping it deliver a compound annual growth rate more than double that of the market since inception。 "Quality Investing" sheds light on the investment philosophy， processes and tough lessons that have contributed to this consistent outperformance。

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Reviews

Matthew Ting ，

man is it possible that i actually like finance？ hm

Asif ，

Torn between giving a 3-star and a 4-star rating but finally decided on 3。 On the positive side， there were some unique things or perspectives that I learned。 I think the flow of the book was a bit negative。 The concepts looked a bit detached from each other and I didn't come out with a clear framework that I can apply。 Torn between giving a 3-star and a 4-star rating but finally decided on 3。 On the positive side， there were some unique things or perspectives that I learned。 I think the flow of the book was a bit negative。 The concepts looked a bit detached from each other and I didn't come out with a clear framework that I can apply。 。。。more

Tab Williams ，

A fantastic book that would be a good companion to Greenwald's Competition Demystified。 Delves into those rare compounders and discuss the traits the exhibit。 The "case studies" were lacking in my eyes， but the depth and breadth of the listed traits were excellent。 Really enjoyed this read。 A fantastic book that would be a good companion to Greenwald's Competition Demystified。 Delves into those rare compounders and discuss the traits the exhibit。 The "case studies" were lacking in my eyes， but the depth and breadth of the listed traits were excellent。 Really enjoyed this read。 。。。more

Zhou Fang ，

I picked this up because Dan Loeb recommended this book in one of Third Point's recent letters。 There are few good investing books out there， and this is one of them。 The book is a thorough checklist of the ingredients of investing in quality businesses， and provides a litany of examples to illustrate the various checklist items。 The framework is very similar to that used by Berkshire Hathaway （in short: companies with predictable recurring revenues that generate high cash-flow returns on invest I picked this up because Dan Loeb recommended this book in one of Third Point's recent letters。 There are few good investing books out there， and this is one of them。 The book is a thorough checklist of the ingredients of investing in quality businesses， and provides a litany of examples to illustrate the various checklist items。 The framework is very similar to that used by Berkshire Hathaway （in short: companies with predictable recurring revenues that generate high cash-flow returns on invested capital with durable competitive moats which allow a company to consistently compound intrinsic value over long periods of time）。 It also walks through some of the frameworks that Buffett and Munger have espoused over time， such as "Toll Roads" （companies that sell a product to a customer which comprises an immaterial portion of the customer's cost structure but is critical to its operations） and "Friendly middlemen" （companies that sell products through expert-salesmen such as opticians and plumbers that incentivize them to generate the highest margin on the company's own products）。 Many of the principles discussed in the book will doubtless be familiar to students of investing， but it's nonetheless a good read due to its extensiveness and case studies。 。。。more

Eddie Lee ，

Overall a good book。 Clearly a lot of wisdom in the book but tries a bit too hard to fit in a very broad set of perspectives without providing sufficient， substantiated depth to be truly insightful。

Yixing J ，

Pretty comprehensive， complete list of things to think about when investing;but I did not find anything new from this book。

Sanford Chee ，

Mandatory reading at Third Pointhttps://twitter。com/DanielSLoeb1/stat。。。GMO on quality https://www。gmo。com/globalassets/arti。。。GMO approach: high profitability/GPM/ROIC; stability in profits （avoid cyclicals）; low debt + valuation overlay Mandatory reading at Third Pointhttps://twitter。com/DanielSLoeb1/stat。。。GMO on quality https://www。gmo。com/globalassets/arti。。。GMO approach: high profitability/GPM/ROIC; stability in profits （avoid cyclicals）; low debt + valuation overlay 。。。more

Marti ，

Muy buen libro que te enseña a detectar ventajas， peligros e inconvenientes desde un punto de vista sensato y racional con ejemplos reales de empresas。

Jon Xander ，

Excellent read focused on the essentials of finding long term quality investments。 Thorough discussion of different case studies of businesses that fit these categories， mistakes made and lessons learned through the years of focusing on compounders。

Tomas Krakauskas ，

Execellent book on quality investing。 In this book you can find a clear definition what is quality investing and what is important for implementing such a strategy。 The book is full of short and simple rules how the process for quality investment should look like。 Almost all chapters are illustrated with small case studies about listed European companies。 Even though I myself invest on similar strategy， but it was definitely worth reading。

Alexander Han ，

Great competitive analysis

Jay Li ，

Quality businesses defy mean reversion， look expensive， but cheap relative to long term potential， and are undervalued by short term investors。

Anthony Avedissian ，

Quality Investing is a short， sweet and engaging book that aims to institutionalise the lessons learned from refining AKO Capital’s quality-focussed investment philosophy。 According to AKO， 3 characteristics indicate quality: 1。 Strong， predictable cash generation2。 Sustainably high returns on capital 3。 Attractive growth opportunitiesEach of these financial traits is attractive in its own right， but combined， they are particularly powerful， enabling a virtuous circle of cash generation， which c Quality Investing is a short， sweet and engaging book that aims to institutionalise the lessons learned from refining AKO Capital’s quality-focussed investment philosophy。 According to AKO， 3 characteristics indicate quality: 1。 Strong， predictable cash generation2。 Sustainably high returns on capital 3。 Attractive growth opportunitiesEach of these financial traits is attractive in its own right， but combined， they are particularly powerful， enabling a virtuous circle of cash generation， which can be reinvested at high rates of return， begetting more cash， which can be reinvested again。Moreover， the 4 most significant challenges in quality investing are: 1。 Battling short-term thinking2。 Conquering prevailing preferences for ‘hard’ numerical data over subjective assessments of quality3。 Accepting that quality companies are not always the most exciting investments4。 Accepting that quality stocks will often appear to be expensive。The book thoroughly outlines the attributes of quality companies and the challenges of investing within this framework。 The authors draw on several entertaining examples of companies and industries to illustrate their arguments， and I would highly recommend this book to anyone interested in entrepreneurship， business， finance and investing。 。。。more

Alessandro Orlandi ，

I listened to it， and the narration was horrible。 I thought that there wasn't anything new。 Even though I enjoyed explaining the power of compounding with good quality companies。 I listened to it， and the narration was horrible。 I thought that there wasn't anything new。 Even though I enjoyed explaining the power of compounding with good quality companies。 。。。more

Daniel Kim Ting ，

Great investing bookGreat investing book about quality investing。 Goes from theory to practice， still has valid examples of industries and companies， and characterizes the challenges in quality investing。

Sa6331 ，

A great book that every investor should read and re-visit regularly。 Starts off with questioning what quality is and how focusing on great businesses that have a moat， strong brand， good management and execution can lead to continued value creation and prosperity。 Highly recommended。

Kjetil ，

Some interesting cases and it all makes sense。 A bit too obvious at times

Pedro Zagury ，

A twist on value investing focusing on quality instead of price。 Good mental model: patterns of quality businesses。

Ravi Srikant ，

The book details investing in so called quality companies （richly valued companies is one definition）。 Key points to note1。 Focus on cash flow generation RoCE and growth opportunities2。 Typically such companies will have a strong brand pricing power or a niche focus area with more or less recurring revenue3。 Keep reviewing the portfolio and dump the hope trade stocks

Brentley Campbell ，

Solid overview of quality with good examples Enjoyed reading about how AKO define quality and some of the things to avoid （or seek out in the case of shorts！） The authors provide good examples of a variety of types of businesses with strong economic moats in sometimes atypical ways。 Not sure that I agree that quality is worth any price， but can see their point on how the market misses the lack of operational volatility and the ability to reinvest cash flow in productive ways。

Benjamin Lim ，

Good examples and easy to readGood amount of examples given about what companies are considered quality investments。 Bit too Euro-centric but not a big issue。

Dunkelheit ，

Nowadays there are many books talking about competitive advantage and this one is one of the best contributions I have read， although it doesn't say too much new。 From an european investor perspective I would recommend it because most of the companies used as examples are european ones， which is something unbelievable in an investing book， but no so surprising taking into account the nationality of the main author。Negative: It is VERY expensive using a Price/Value ratio。 Nowadays there are many books talking about competitive advantage and this one is one of the best contributions I have read， although it doesn't say too much new。 From an european investor perspective I would recommend it because most of the companies used as examples are european ones， which is something unbelievable in an investing book， but no so surprising taking into account the nationality of the main author。Negative: It is VERY expensive using a Price/Value ratio。 。。。more

Joel Gray ，

MARKET SHARE GAINS REPRESENT THE BEST PATHWAY TO GROWTH IF THEY HAPPEN IN A CONSISTENT WAY AND， IDEALLY， IN A MARKET WHERE THE INVESTOR CAN IDENTIFY A RELIABLE SHARE DONATOR。AKO capital is London based and was established in 2006。 Done 5%pa alpha。Good managers have long term vision for a business and the tenacity to realise it。A reputation of high quality or reliability is earned over time。 To compete with reputation is almost impossible。 Banks - commodity products， high leverage， regulation and MARKET SHARE GAINS REPRESENT THE BEST PATHWAY TO GROWTH IF THEY HAPPEN IN A CONSISTENT WAY AND， IDEALLY， IN A MARKET WHERE THE INVESTOR CAN IDENTIFY A RELIABLE SHARE DONATOR。AKO capital is London based and was established in 2006。 Done 5%pa alpha。Good managers have long term vision for a business and the tenacity to realise it。A reputation of high quality or reliability is earned over time。 To compete with reputation is almost impossible。 Banks - commodity products， high leverage， regulation and cyclically - avoid。 Low cost is the only possible CA in banking。 McDonald's is built on a si。ple equation - inexpensive good of consistent quality delivered quickly in a clean environment。A business that is linked solely to customers capex makes for a more complicated investment than one linked to operating costs。Quality investing means accepting the relative dullness of analysing what is often in plain view。On a 1 year view 80% of a stock price move is explained by changes in multiples but the driver of long term stock returns is earnings growth。 。。。more

Liam Polkinghorne ，

This review has been hidden because it contains spoilers。 To view it， click here。 Three characteristics indicate quality: strong predictable cash generation， sustainably high returns on capital and attractive growth opportunities。 Patterns emerge when reviewing companies perceived as meeting these criteria: recurring revenue， friendly middlemen， toll roads， low-price plus， pricing power， brand strength， innovation dominance， forward integration， market share gainers， global capabilities and leadership， corporate culture， cost to replicate。 Typical quality pitfalls are cyclica Three characteristics indicate quality: strong predictable cash generation， sustainably high returns on capital and attractive growth opportunities。 Patterns emerge when reviewing companies perceived as meeting these criteria: recurring revenue， friendly middlemen， toll roads， low-price plus， pricing power， brand strength， innovation dominance， forward integration， market share gainers， global capabilities and leadership， corporate culture， cost to replicate。 Typical quality pitfalls are cyclical growth， temporary tailwinds of fickle consumer trends and technological leadership vulnerable to disruption。 Some interesting points around valuation: the risk of overpayment exists， but far less than you might think。 PE ratios are high， but quality companies typically continue to exceed estimates year after year， and waiting for them to appear very cheap by conventional standards rarely occurs， except in widespread market declines。 On a one year view， 80% of stock price moves are explained by changing multiples， however the long term driver of returns is earnings growth。 In terms of avoiding the mean reversion of earnings and returns， companies able to deploy cash at consistently high returns on capital due to some sustainable competitive advantage are able to avoid this reversion。 Quoted Goethe: to think is easy， to act is hard， but the hardest thing in the world is to act in accordance with your thinking。 。。。more

Douglas O'laughlin ，

Pretty good。 Feel like it's almost an exercise in confirmation bias for my investing philosophy， and I'm cognizant and worried of "fads" similar to the outsiders book haha。All in all， really solid book。 Lots of useful leads in the footnotes as well。 Pretty good。 Feel like it's almost an exercise in confirmation bias for my investing philosophy， and I'm cognizant and worried of "fads" similar to the outsiders book haha。All in all， really solid book。 Lots of useful leads in the footnotes as well。 。。。more

Trung Nguyen Dang ，

It's good and easy read book not wholly fulfilling。 It talks a lot about what makes a business great， how to identify great businesses 。。。 etc， and spend a short chapter on why the market tend to under-value high quality companies。 The struggle， at least for me， is more about at what valuation does it start to make sense。 The book did not add a lot to that。 But it reinforces the notion of quality over value， qualitative over quantitative。 Overall I enjoy it and learn something from it。 Perhaps a It's good and easy read book not wholly fulfilling。 It talks a lot about what makes a business great， how to identify great businesses 。。。 etc， and spend a short chapter on why the market tend to under-value high quality companies。 The struggle， at least for me， is more about at what valuation does it start to make sense。 The book did not add a lot to that。 But it reinforces the notion of quality over value， qualitative over quantitative。 Overall I enjoy it and learn something from it。 Perhaps a 4 our of 5 stars from me。 。。。more

Sy。 C ，

Excellent overview of the "quality" （as opposed to "growth" or "value"） style of investing。 The author goes briefly into many case studies， primarily European names， as well as a few of their investing mistakes。 Excellent overview of the "quality" （as opposed to "growth" or "value"） style of investing。 The author goes briefly into many case studies， primarily European names， as well as a few of their investing mistakes。 。。。more

Pontaeus ，

A book from practicians （AKO Capital） that spends their professional career investing in the highest quality companies。 Touches on many different aspects of how these companies will look， and how they will not look。 Finance， accounting， management， strategy， marketing， and psychology is mixed with the investing theme。 It's written as a sort of intro to AKO Capital and their beliefs。Now， it's an OK book。 Not more， not less。 The first half is interesting and got a bit more meat than the second hal A book from practicians （AKO Capital） that spends their professional career investing in the highest quality companies。 Touches on many different aspects of how these companies will look， and how they will not look。 Finance， accounting， management， strategy， marketing， and psychology is mixed with the investing theme。 It's written as a sort of intro to AKO Capital and their beliefs。Now， it's an OK book。 Not more， not less。 The first half is interesting and got a bit more meat than the second half。 Very shallow at parts。 If you're a student of investing it's likely that you won't learn a lot new but might still get some ideas， especially if you delve deeper into the subject on the side。I would definitely recommend looking into all the notes accompanied， and to read the work they're citing that seems interesting。 This will take care of the shallowness of the book and give the subject much more depth， which it deserves。 。。。more

Saurabh Shankar ，

The books premise is based on hypothesis that there are some companies who are able to beat the theory of mean reversion。 For these companies valuations at many point of time will look more expensive than overall market， but due to the longevity of the earnings markets will under price them。The book states that there are few patterns visible across these companies which make them so robust。 They are 1。 Recurring Revenues--> The ease with which these companies are able to generate recurring reven The books premise is based on hypothesis that there are some companies who are able to beat the theory of mean reversion。 For these companies valuations at many point of time will look more expensive than overall market， but due to the longevity of the earnings markets will under price them。The book states that there are few patterns visible across these companies which make them so robust。 They are 1。 Recurring Revenues--> The ease with which these companies are able to generate recurring revenues。 Example， service contracts associated with purchases。2。Friendly Middlemen--> When the distributor or intermediary drive companies growth。 This is very interesting。 As one needs to think how company is addressing the incentive of these distributors。 3。 Toll Roads- These are those industries who provide those critical services without which a large companies or businesses can't survive。 And they do it at a very low cost in overall scheme of things。 Think that if you need to go somewhere you would need to take some toll roads。 The cost of toll will be much lesser than importance of journey。4。Low-Price Plus: Companies which go beyond just low cost。 They provide enhancing features with low cost。 Example ZARA， Ikea5。Pricing Power: Ideally， there are no companies who have complete pricing power。 Relatively better pricing power can be seen in luxury brands， conditional pricing （ pricing power due to recurring sales- coke）6。 Brand Strength- Brand combined with distribution， Advertising and promotion make a lethal combination。 This is hard to replicate7。Innovation Dominance-There are companies who build culture of innovation。 This helps either the company to increase volume or induce customer switching cost。8。Forward Integrator-Typically these are self owned distribution or franchise models。 Combined with brand and innovation hard to replicate9。Market Share Gainers-Those who do it prudently and keep enhancing competitive advantage as they go ahead。10。Global Capabilities and leadership11。 Corporate Culture- Probably the most important point for me and which is hardest to find。12。Cost to replicate- This is more of a tool to understand companies position。 Think how much effort will it cost someone to replicate this。These patterns are based on basic premises that a companies number one job is capital allocation。 Ensuring maximum investments happen in high capital return projects。Finally the book also touches upon pitfalls to avoid and challenges in implementation。 。。。more

Reference

google book https://www.google.com/search?tbm=bks&q=Quality Investing: Owning the Best Companies for the Long Term

hathitrust digital library https://babel.hathitrust.org/cgi/ls?q1=Quality Investing: Owning the Best Companies for the Long Term&field1=ocr&a=srchls&ft=ft&lmt=ft

The British Library https://bll01.primo.exlibrisgroup.com/discovery/search?query=any,contains,Quality Investing: Owning the Best Companies for the Long Term&tab=LibraryCatalog&search_scope=Not_BL_Suppress&vid=44BL_INST:BLL01&lang=en&offset=0